Photo: Associated Press
Microsoft reported bang-up earnings this afternoon, with revenues of $16.20 billion, higher than analysts’ top estimates of $16.18 billion, and well ahead of the $15.80 billion consensus. EPS was $0.62 per share, ahead of the consensus estimate of $0.55 and top-end estimate of $0.57. Profits rose 52% from last year, to $5.41 billion. The stock’s up more than 3% after hours.
The company is holding a call to discuss the results with investors at 5:30PM ET and I’ll be live blogging it right here. Click here or refresh your browser for the latest updates.
6:06. That’s a wrap. Thanks for following along.
6:03: Ah, a good question: what about the impact on P&L of the move to the cloud, and Office 365 specifically? Klein says it’s new opportunity–customers we don’t have today, revenues that we’re not getting because they’re not using all our products. The recent win in New York is one recent example, Starbucks is another. It increases our penetration in the midmarket. So it doesn’t replace existing contracts, it adds to it. (This is consistent with what they said at last year’s Financial Analyst Meeting.)
6:01: Microsoft has increased its outlook for annuity revenue in both Business and Server & Tools. Multiyear agreements are going great.
6:00: Question: Overall consumer revenue seems about flat while business revenues seem to be up more than 10%. Is that right? Klein doesn’t really answer, except to say that Kinect has momentum and that Office consumer revenue was up 26%.
5:58: Klein’s not offering a lot of insight here, giving some pretty vague answers. Basically, PC spending is good, costs are under control.
5:52: Now we’re into Q&A. Klein’s talking about macroeconomics–IT spending is picking up.
5:51: Capex $2.5 billion for the year. No change from last quarter’s estimates.
5:50: Online will start seeing effects of the Yahoo-Bing integration gradually over the next few quarters. For Entertainment and Devices, MSFT expects Q2 growth to be 30% from last year, thanks to Kinect and high interest demonstrated this quarter. COGS will also be up, though–hardware has costs that software doesn’t.
5:48: Server & Tools in line with hardware growth. Business Division revenue is split into two. Annuity revenue (from multiyear agreements) should be up close to 10% year to year as the unearned revenue from multiyear licence deals begins to be recognised.
5:48: Windows division revenue should grow in line with the PC market, not including various one-time events related to the Windows 7 launch.
5:47: Now Peter Klein (CFO) is getting on to talk about expectations. They expect business PC growth to outpace consumer PC growth–that’s good as it raises the average price per sale from last year.
5:45: Now to Entertainment and Devices, where revenue was up 27%. Microsoft sold 2.8 million Xbox consoles sold the quarter. Halo Reach had a solid launch with $350 million in revenue.
5:43: Now he’s talking about the other businesses in the Business Division. Exchange and SharePoint are each billion-dollar businesses, and both grew more than 10%. With Office 365, Microsoft will “sell to more people and increase customer satisfaction.”
5:42. Office 2010 unit sales are 27% higher than Office 2007 over the same time period. Consumer revenue was particularly strong, up 26%. Business was also up 11%–that’s better than the last quarter’s year-to-year growth. Multiyear licensing was up 5% from last year.
5:41. Jeez, Online’s still a dog. Ad revenue grew 13%, but overall revenue was up only 8%. No discussion of the huge loss.
5:40: Server hardware unit sales were up about 15%, helping Microsoft’s often underrated Server & Tools segment (enterprise software) grow 12%. Looks like the IT recovery is well underway. Windows Server premium mix was up, System centre (management) revenue grew 20%, and revenue from virtualization suites was up 50%.
5:38. PC unit sales were up between 9 and 11%, business PC sales up around 15%. Koefoed claims they’ve not seen a shift away from mobile PCs due to tablets. (That is: iPad? What iPad?)
5:37: Strengthening trends in the enterprise segment despite what’s usually a weak quarter. Unearned was $13.9 billion due to strength in Enterprise Agreements (big multiyear licence contracts signed by large customers).
5:35: Koefoed is back now, talking about bookings, which were up 24% from last year. Small and mid-size business revenue was up 30%.
5:33: CFO Peter Klein is giving some highlights. His main point: it’s not just about Office and desktop apps. Revenue from SharePoint (document sharing and intranet), Lync (IM and VoIP), Dynamics (accounting) and other Business Division server products all grew more than 10% during the qauarter.
5:30: Bill Koefoed, Microsoft’s GM of investor relations is kicking off the call. CFO Peter Klein is also on the call, as usual.